2014 (5) TMI 271 - AT - Income Tax

Deletion of Penalty u/s 271D of the Act Cash loans noticed during assessment Violation of section 269SS of the Act - Held that - Relying upon CIT us. Noida Toll Bridge Co. ltd. 2003 (1) TMI 46 - DELHI High Court the amounts standing as liability in the appellant s balance sheet are nothing but advances for purchase of fixed assets, which does not attract penalty u/s.271D as it is not a loan or deposit within the meaning of Sec.68 r.w.s.269SS - the amount is nothing but the advances for the purpose of fixed assets, which does not attract penalty u/s 271D of the Act as it is not a loan or deposits within the meaning of S.269SS of the Act - the advances received by the assessee for purchase of assets cannot be held as loan or deposit as prescribed in Section 269SS - AO has recorded the statement of lenders who had confirmed on oath before the AO and also filed the affidavits that they had advanced money to the appellant against purchase of assets Decided against Revenue.

Summary

Issues:
1. Penalty under section 271D of the IT Act for Rs.6,41,000 levied by Addl. CIT, Navsari.
2. Interpretation of advances received for purchase of assets as loan or deposit under section 269SS.

Issue 1: The appeal was filed by the Revenue against the order of the CIT(A), Valsad, for A.Y. 2006-2007, challenging the deletion of the penalty of Rs.6,41,000 imposed by the Addl. CIT, Navsari under section 271D of the IT Act. The Addl. CIT found that the advances received by the assessee amounted to a violation of section 269SS, leading to the penalty imposition.

Issue 2: The CIT(A) allowed the assessee's appeal by observing that the advances received were not to be considered as "loan" or "deposit" under section 269SS, as they were received for the purchase of assets on behalf of the parties or creditors. The CIT(A) referred to various legal precedents and held that the amounts were in the nature of advances for fixed assets, not attracting penalty under section 271D. The assessee's representative cited statements and affidavits confirming the purpose of the advances, supporting the argument that they were not loans or deposits.

The Revenue, represented by the Senior D.R., contested the CIT(A)'s decision, emphasizing that the advances were considered loans under section 269SS, leading to the penalty imposition. However, the Tribunal upheld the CIT(A)'s decision, noting that the advances for asset purchase did not fall under the definition of loan or deposit as per section 269SS. The lenders' statements and affidavits supported the purpose of the advances, aligning with legal precedents cited.

In conclusion, the Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order. The judgment highlighted the distinction between advances for asset purchase and loans or deposits under section 269SS, ultimately leading to the deletion of the penalty under section 271D. The decision was based on the evidence presented, legal interpretations, and relevant precedents.